Can Nilekani, the architect of the world’s largest biometric project, spark digital payments in India?

Nandan Nilekani, Infosys co-founder and the architect of the world’s largest biometric system, was just appointed by India’s central bank to improve the adoption of digital payments in the country.

Despite numerous attempts by the Indian government, cashless payments dipped once cash was available after Prime Minister Narendra Modi’s demonetisation exercise.

There are numerous challenges ahead for Nilekani including addressing the level of digital literacy in the country and keeping digital payments affordable.

India now has 800 million mobile phone users but merely a fraction are using digital payments. The Reserve Bank of India has brought none other than Nandan Nilekani, the architect of the world’s largest biometric identity system, the Aadhaar, after several attempts to push Indians to go cashless fell short of the government’s goal.

While the infamous demonetisation in November 2016, which aimed at pushing Indians to use digital payments, gave a temporary fillip to mobile wallets — the momentum wasn’t maintained once banks had enough cash to dispense.

According to the government think tank, Niti Aayog, the digital payment market is set to reach $1 trillion by 2023.However, Nilekani, an entrepreneur-turned-techocrat, has his task cut out for him and it’s not an easy one.

The five-member panel on deepening of digital payments has been constituted with a view to encourage digitisation of payments and enhance financial inclusion through digitisation.

Reserve Bank of India, press statement

More internet penetration, but is it enough

More people in India have access to internet in India than ever before but the infrastructure and connectivity is far from ideal, more so outside the big cities — even with credit or debit card transactions.

Even when demonetisation took place, PayTM — one of India’s most-used digital wallets —
crashed under the sudden increase in traffic.

Force of habit

It’s not about knowing that you can make payments using the internet, it’s also about habit. In rural areas, due to the lack of infrastructure and appropriate incentives — going to the bank or to the market is still easier and cheaper than shopping online.

Limited digital literacy

The biggest hurdle in the committee’s way isn’t access to internet but digital literacy. Educating the masses so that they are able to use these apps will be a prerequisite. Even among those who are familiar with digital modes, a large section of Indians are still paranoid about the safety of online transactions.

The question of security

A report by Qualcomm states that a lot of wallets and banking apps in India lack the requisite hardware security. And since they run on Android accommodating versions that lack the latest security updates, they are relatively more vulnerable to being hacked. The question isn’t only of alphanumeric passwords but also biometrics, like your fingerprint.

Even one of RBI’s mandate is speaks to that regard.

Suggest measures to strengthen the safety and security of digital payments and a roadmap for increasing customer confidence and trust while accessing financial services through digital modes.

Reserve Bank of India, press statement

Security and trust are two different things

Even with best security in place, the people will only use digital payments if there’s trust. The recent data leaks and reports of insider fraud at PayTM have not helped that cause.

Most people prefer cash in the country because it doesn’t leave a digital footprint under the perception that having every transaction scrutinized could lead to more trouble.

Nilekani, one of the founders of Indian tech services major Infosys, is often eulogized for creating the Aadhaar framework, but notwithstanding the magnitude of the exercise, the unique identity project has had its share of chinks.

The Tribune, when looking into the security of the Aadhar database, found that they could attain all the details about a person using the 12-digit unique identification number after
paying an agent ₹500. For another ₹300, you get a physical copy of the Aadhaar card, which could then be used to access various government schemes.

Robert Baptiste, a french researcher known by online Twitter handle ‘Elliot Alderson’, was
able to hack into the Aadhaar app in under a minute. Another twitter user, Srinivas Kodali,
exposed how 8.9 million Aadhaar numbers were vulnerable.

Aadhaar was still a mode for people to receive government benefits and cash transfer. It will take a lot more time and effort to convince penny-wise Indians to risk their money in digital payment apps.